Propy, an online real estate company, has started offering title and escrow services on the blockchain for residential real estate transactions in Arizona, Colorado and Florida.
This builds on two trends in the real estate and mortgage industries: the growing use of electronic closings and remote online notarization in home sales and explorations in using blockchain technology in other parts of the process as exemplified by Figure Technologies, both through its partnership with mortgage servicing system provider Sagent and in the creation of MERS alternative Digital Asset Registration Technologies.
“We had already built the next generation closing platform in which smart contracts play the role of the escrow and title is recorded on the blockchain,” Propy’s founder and CEO Natalia Karayaneva said in a press release. “Launching the escrow and title business now brings us closer to our dream of closing more and more transactions in a secure blockchain environment.”
Palo Alto, California-based Propy plans to offer these nationwide within the next 24 months. The company is known for selling properties on its blockchain using non-fungible tokens, claiming to have facilitated $4 billion of transactions in the U.S.
Some mortgage industry observers consider blockchain to be a potential replacement for the current system of real estate property recordkeeping, which can involve decades of written documents in county clerks’ offices.
Fraud prevention is another consideration for using blockchain. The growing use of business email compromise scams to divert funds that would be used to close the transaction has increasingly created headaches in real estate and mortgage. Losses relating to these schemes increased by 33% in 2021 over the previous year, to $2.4 billion from $1.8 billion, according to the Federal Bureau of Investigation.
“With blockchain technology and security, wire fraud is virtually impossible,” said Anna Atencio, CEO of Propy Title, “Imagine the benefit for all parties of a transaction having full transparency of what is being delivered at each step of the transaction, and to the deed being recorded both on the blockchain and with the local county.”
Among Propy’s investors is Second Century Ventures, which is a part of the National Association of Realtors. Its initial $15.5 million funding came from a 2017 initial coin offering, according to Crunchbase. Venture capitalist Tim Draper made a $1.2 million investment in 2020.